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Self-directed Coverdell Education Savings Accounts allow individuals to invest funds for educational purposes.
Formerly known as an Education IRA, this trust or custodial account is created for the purpose of paying qualified education expenses of the designated beneficiary.
Contributions to a Coverdell ESA are not deductible, but all distributions are tax-free if they are used for qualified education expenses at an eligible institution.
Education savings accounts can be applied to qualified elementary, secondary, and higher education expenses.
Talk to an IRA Counselor about education savings accounts.
A CESA can be opened for a beneficiary who is under the age of 18 or for someone with special needs. For 2023/2024, the maximum contribution to a Coverdell ESA is $2,000 per year.
Unlike other savings plans that require earned income, you don’t need income to open a CESA.
However, if you do have earned income you must fall within certain modified adjusted gross income limits (MAGI). Your MAGI for the year that you open the account must be less than $95,000-$110,000 ($190,000-$220,000 for a joint return).
2023/2024 CESA Contribution Limits
|Coverdell Educational Savings Account (CESA) Contribution Limits
|Standard Limit (Up to Age 18)
|Modified AGI Limits to Qualify for Account
|Single: $95,000 – $110,000
Married Filing Joint: $190,000 – $220,000
|2023 CESA Contribution Deadline is 4/15/2024.
2024 CESA Contribution Deadline is 4/15/2025.
For more CESA information see IRA Publication 969.
When a CESA account is referred to as a self-directed account, it simply means you can use the account invest in areas outside of the traditional stocks and bonds. That’s the primary difference between a self-directed and traditional retirement or other savings account — where you put those investment dollars.
With a self-directed CESA, IRA, or 401(k), you can invest in a variety of areas, including:
What is a Coverdell Education Savings Account (CESA)?
How does a self-directed Coverdell ESA work?
Are contributions to a Coverdell Education Savings Account tax deductible?
What are the CESA contribution limits?
Are there income limits associated with Coverdell Education Savings Accounts?
What’s the difference between a 529 plan and a Coverdell Education Savings account?
How do you open a Coverdell Education Savings Account?
Let’s talk about your financial future.
Schedule a one-on-one session with an expert alternative investment counselor. We’re here to answer any questions, help guide you through the process, and provide more detailed information and education specific to your journey.
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